That's *how much* per link?!?
October 11, 2005 7:45 AM   Subscribe

Does AOL's acquisition of Weblogs, Inc. make financial sense? Yet another excellent quantitative analysis from Tristan Louis, who seems to spend a lot of time digging for numbers relating to the so-called blogosphere -- see also his granular analysis of what distinguishes A-list from B-list bloggers and another analysis more specifically examining Technorati links, as well as his analysis of the sort of cash Gawker is paying out which was discussed here earlier. Whatever the price investors don't seem to be hitting the panic button at the deal.
posted by clevershark (5 comments total)
Time Warner is an $84 billion market cap company. Most investors probably don't even know about the acquisition and, if they do, they are much more concerned about Carl Icahn's pressure to divest the cable business. The price they paid may or may not make sense as a standalone investment (especially from the perspective of an individual), but to a large conglomerate the deal amounts to merely buying a call option on the upside potential.
posted by mullacc at 9:30 AM on October 11, 2005

Why would the general public care about any of this?
posted by davy at 9:36 AM on October 11, 2005

Because Time Warner could buy MetaFilter (or name your favorite blog) at a price that would make mathowie a rich man but would hardly move the needle for Time Warner. Thus, nobody but the old MeFi users will care when Time Warner decides to shut it down or turn it into some bizarre monstrosity.
posted by mullacc at 10:03 AM on October 11, 2005

Actually, I believe the general public should NOT care about this (and being the author of the stuff that's linked, I think I should know :) ). The people who should care about this are the ones in the internet and media industry. Basically, by putting the focus on a number of metrics around the blogosphere, I'm trying to assess some baseline for estimating the value of blogs. It seems to me there hasn't been much discussion about what goes into the valuation models of blogs. So I'm trying to get it started.

There are a number of metrics one should be able to use when assessing the financial value of a blog (and eventually of podcasts too :) ). I'm still struggling in trying to find what those numbers are. So far, I'm thinking that (beyond the traditional tools like revenue, marketshare, and traffic used for other web sites) there is some value to be put on components of blogs. Links are one potential metric (and I think I've now blogged that one to death) but not the only one. Others could be RSS subscribers, archive size (because of the extra advertising inventory they could represent) and focus.

If one considers blogs as a form of micro-publishing, there can then be an objective analysis of their value. Eventually, blogs will be treated as some form of media and those numbers will become handy to companies or people who are in the business of acquiring blogs.

Furthermore, in terms of blog authors, those metrics will increasingly become relevant as advertisers will eventually ask for that kind of data before making a purchase.

Before people scream about the shameless commercialization of the blogosphere, let me say that it will happen, whether one likes it or not (the same screams occurred in the early days of the commercial internet when sites like HotWired put up the first banner ads). Like it or not, there will be (and has been already) money to be made in the blog world. However, until proper metrics are in place, it will be somewhat of a crapshoot.

Now, on to the analysis itself. I put it together in a couple of hours and have been somewhat surprised by its success. However, few people realized that links, in and of themselves, do not generate the full value. Revenue is still a more important metric and I'm sure that traffic probably also holds more weight than linkage. I'm still trying to figure it out and I'm trying to guess at directional numbers. It could be that the deal between AOL and WeblogsInc. represents a high watermark. Or it could be that it does not.
posted by TNLNYC at 10:42 AM on October 11, 2005

I can't access your website at work, TNLNYC, so I may be way off base, can you even begin to value something as nascent as a blog using metrics as you describe? If you're concerned with the intrinsic value of this type of business, a metric like value/subscribers or value/monthly links or whatever is basically useless. For a mature media/telecom business, multiples like these are merely a shorthand for intrinsic value - they imply certain growth and return expectations. But a blog is such a new business model that growth and return expectations should vary wildly - Gawker could be the next Yahoo! or it could be nothing. The Skype acquisition is a good example - eBay paid $2.7 billion for a company with $60mm in revenue. Does that mean that VoIP companies are worth 45x revenue? I doubt it.
posted by mullacc at 11:12 AM on October 11, 2005

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